Definitions

marketing study

Industrial marketing

Industrial marketing is the marketing of goods and services from one business to another. The word "industrial" has connotations of heavy machinery, mining, construction etc. but "industrial marketing" is not confined to these types of business activities. Broadly (and inadequatly) marketing could be split into consumer marketing (B2C "Business to Consumer") and industrial marketing (B2B "Business to Business"). The key differences are...

B2B Business to Business (or "Industrial")

Typical examples of a B2B selling process are...

  • An organization is seeking to build a new warehouse building. After carefully documenting their requirements, it obtains three proposals from suitable construction firms and after a long process of evaluation and negotiation it places an order with the organization that it believes has offered the best value for money.
  • An organization has significant need for legal services and obtains submissions from two law firms. Analysis of the proposals and subsequent discussions determines that there is no price advantage to placing all of the work with one firm and the decision is made to split the work between the two firms based on an evaluation of each firm's capabilities.
  • A sales representative makes an appointment with a small organization that employs 22 people. He demonstrates a photocopier/fax/printer to the office administrator. After discussing the proposal with the business owner it is decided to sign a contract to obtain the machine on a fully maintained rental and consumables basis with an upgrade after 2 years.

The main features of the B2B selling process are...

  • Marketing is one-to-one in nature. It is relatively easy for the seller to identify a prospective customer and to build a face-to-face relationship.
  • High value considered purchase.
  • Purchase decision is typically made by a group of people ("buying team") not one person.
  • Often the buying/selling process is complex and includes many stages (for example; request for expression of interest, request for tender, selection process, awarding of tender, contract negotiations, and signing of final contract).
  • Selling activities involve long processes of prospecting, qualifying, wooing, making representations, preparing tenders, developing strategies and contract negotiations.

See also B2B definition.

B2C Business to Consumer (or "Consumer")

Examples of the B2C selling/buying process are...

  • A family are at home on a Sunday night and are watching television. An advertisement appears that advertises home delivered pizza. The family decides to order a pizza.
  • Walking down a supermarket aisle, a single man aged in his early 30's sees a hair care product that claims to reduce dandruff. He pick's the product and adds it to his shopping cart.
  • A pensioner visits her local shopping mall. She purchases a number of items including her favourite brand of tea. She has bought the same brand of tea for the last 18 years.

The main features of the B2C selling process are...

  • Marketing is one-to-many in nature. It is not practical for sellers to individually identify the prospective customers nor meet them face-to-face.
  • Lower value of purchase.
  • Decision making is quite often impulsive (spur of the moment) in nature.
  • Greater reliance on distribution (getting into retail outlets).
  • More effort put into mass marketing (One to many).
  • More reliance on branding.
  • Higher use of main media (television, radio, print media) advertising to build the brand and to achieve top of mind awareness.

See also B2C definition.

Proponents of the industrial marketing process argue that it requ

Blurring between the definitions

As in all things, the definitions are not clear cut. For example, an organisation that sells electronic components may seek to distribute its products through marketing channels (see channel (marketing)), and be selling relatively low value products. However, the final purchaser is still a business. Equally there are big ticket items purchased by non-business consumers (houses and motor vehicles being the obvious examples). However, even though these definitions are blurred, sales and marketing activities aimed at B2B are distinctly different from B2C (as outlined above).

Competitive tendering

Industrial marketing often involves competitive tendering (see tender, tendering). This is a process where a purchasing organisation undertakes to procure goods and services from suitable suppliers. Due to the high value of some purchases (for example buying a new computer system, manufacturing machinery, or outsourcing a maintenance contract) and the complexity of such purchases, the purchasing organisation will seek to obtain a number of bids from competing suppliers and choose the best offering. An entire profession (strategic procurement) that includes tertiary training and qualifications has been built around the process of making important purchases. The key requirement in any competitive tender is to ensure that...

  • The business case for the purchase has been completed and approved.
  • The purchasing organisation's objectives for the purchase are clearly defined.
  • The procurement process is agreed upon and it conforms with fiscal guidelines and organisational policies.
  • The selection criteria have been established.
  • A budget has been estimated and the financial resources are available.
  • A buying team (or committee) has been assembled.
  • A specification has been written.
  • A preliminary scan of the market place has determined that enough potential suppliers are available to make the process viable (this can sometimes be achieved using an expression of interest process).
  • It has been clearly established that a competitive tendering process is the best method for meeting the objectives of this purchasing project. If (for example) it was known that there was only one organisation capable of supplying; best to get on with talking to them and negotiating a contract.

Because of the significant value of many purchases, issues of probity arise. Organisations seek to ensure that awarding a contract is based on "best fit" to the agreed criteria, and not bribery, corruption, or incompetence.

Bidding process

Suppliers who are seeking to win a competitive tender go through a bidding process. At its most primitive, this would consist of evaluating the specification (issued by the purchasing organisation), designing a suitable proposal, and working out a price. This is a "primitive" approach because...

  • There is an old saying in industrial marketing; "if the first time you have heard about a tender is when you are invited to submit, then you have already lost it."
  • While flippant, the previous point illustrates a basic requirement for being successful in competitive tendering; it is important to develop a strong relationship with a prospective customer organisation well before they have started the formal part of their procurement process.

(more needed)

Non-tender purchasing

Not all industrial sales involve competitive tendering. Tender processes are time consuming and expensive, particularly when executed with the aim of ensuring probity. Government agencies are particularly likely to utilise elaborate competitive tendering processes due to the expectation that they should be seen at all times to be responsibly and accountably spending public monies. Private companies are able to avoid the complexity of a fully transparent tender process but are still able to run the procurement process with some rigour.

Developing a sales strategy/solution selling/technical selling

The "art" of technical selling (solution selling) follows a three stage process...

  • Stage 1: Sell the appointment: Never sell over the telephone. The aim of the first contact with a propsective purchaser is to sell the appointment. The reason is simple; industrial sales are complex, any attempt to sell over the phone will trivialise your product or service and run the risk of not fully understanding the customer's need.
  • Stage 2: Understand their needs: The best method of selling is to minimise the information about your goods or services until you have fully understood your customer's requirements.
  • Stage 3: Develop and propose a solution. The solution is (of course) developed from your (or the firm that you represent's) product or service offerings.

The important point about solution selling is that it is essential not to sell the solution before you understand the customer's requirements; otherwise you are highly likely to unwittingly sell them on how ill-suited your solution is to meeting their requirements. To illustrate; imagine a couple seeking the services of an architect start their first meeting with the inevitable "we want to build a house." If the architect leapt in at that point and proceeded to show them his favourite design influence "the Mediterranean look" only to discover that they hate "Mediterranean" and wanted something "a bit more Frank Lloyd Wright" he will have gone most of the way toward alienating the sale. You can see that if he had "kept his powder dry" for a bit longer and first discovered what they were looking for, he could have better understood which way to skew his pitch. He was equally capable of designing in a Frank Lloyd Wright style.

The marketing function is able to support this solution sell through tactics like account-based marketing – understanding the requirements of a specific target organization and building a marketing program around these. As research shows, sales success is heavily weighted towards suppliers who can understand their audience before selling to them (in UK research, 77 per cent of senior decision-makers believe that the marketing approaches made by new suppliers are poorly targeted and make it easy to justify staying with their current supplier).

From cannon fodder to preferred tenderer

The term "cannon fodder" derives from the World Wars and refers to the massing of undertrained and recently recruited troops sent to the fronts to face the enemy. It was noted that such troops invariably had a short survival rate but provided the tactical advantage of distracting the enemy while professional soldiers mounted a flanking manoeuvre and came around from the side or from behind the enemy. In adopting the term to Industrial Marketing it means those bids being submitted that have no chance of winning but are involved to make up the numbers (you can't have only one bid in a "competitive" tender process; that wouldn't satisfy the requirements of probity (for example in government tenders, or for private enterprise the requirement to "truly test the market" and to "keep them honest"). The reader might be wondering why anybody would go to all of the work of submitting a tender when they had no chance of winning; for the same reason that troops were sent in to battle to die; they thought they had a real chance.

The key features of a successful industrial sales organisation

In industrial marketing the personal selling is still very effective because many products must be customized to suit the requirements of the individual customer. Indicators such as the sales tunnel give information on the expected sales in the near future, the hit rate indicates whether the sales organization is busy with promising sales leads or it is spending too much effort on projects that are eventually lost to the competition or that are abandoned by the prospect.

Bold text== The internet and B2B marketing ==

The "dotcom" boom and bust of the late 90's saw significant attempts to develop a new retailing business model; on-line shopping. Many entrepreneurs (and their investors) discovered that merely having a website (no matter how innovative) was insufficient to generate sales; the amount of conventional main media advertising required to promote the sites burnt cash at a faster rate than they could generate through on-line sales. They also presumed that consumers would eschew the irksome shopping experience (driving, parking, poor service etc.) for the wonder and convenience of shopping on-line. Some did; but not in sufficient numbers. There were many unforeseen problems and apart from some notable exceptions (Amazon.com and others) the B2C online model was a spectacular failure. However, the same cannot be said of B2B selling where some quite impressive results have been achieved.

See also

Hit rate

References

Industrial Marketing Study Seminar
Chicago based B2B expert
Australian based B2B organisation
Whitepaper on industrial branding
Industrial Marketing Plan Development Methodology
Heiman, Stephen E. and Diane Sanchez. The New Strategic Selling: The Unique Sales System Proven Successful by the World's Best Companies. New York: Warner Books, 1998.

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